PrepTest 130, Section 3, Question 25
Economist: Although obviously cuts in personal income tax(96 more words not shown)
Which one of the following(11 more words not shown)
- ACuts in personal(15 more words not shown)
- BAcross-the-board cuts in(18 more words not shown)
- CIt is the(14 more words not shown)
- DIt is primarily(15 more words not shown)
- EAcross-the-board personal income(12 more words not shown)
Reading the argument
A tax cut aimed at upper income brackets disproportionately benefits the wealthy. That is the opening concession. The economist's less obvious claim is that cutting personal income tax rates across all brackets tends to have a similar effect. Why would a cut for everyone still favor the wealthy?
The economist gives two paths. First, suppose total tax revenue stays constant. Personal income taxes are progressive: their rates rise with income. In the argument's account, replacing the revenue lost from those cuts requires collecting more through nonprogressive taxes. Moving the burden away from the progressive system favors the wealthy.
Second, suppose those replacement taxes aren't increased. The budget deficit grows, the government borrows more, and interest rates rise. Higher rates favor people who have money to lend, whom the economist identifies primarily as the wealthy. Someone lending money can receive more interest, while someone without money to lend doesn't get that advantage.
What we’re looking for
Both paths explain the same proposed result of across-the-board cuts. For the main-conclusion question, we should identify that shared point rather than select only one branch of its support. The issue here is who benefits disproportionately, not whether the tax policy is good or bad overall.
Working the answers
- A
This restates the opening concession about cuts aimed at upper income brackets. The economist uses that familiar point as a contrast before arguing that cuts across all brackets have a similar effect. A leaves out the broader category of cuts whose effects the rest of the passage explains.
- B
The passage doesn't develop a claim about additional economic activity generated by tax cuts. It traces two ways the cuts can favor wealthy people. B introduces a revenue-growth issue rather than expressing that main point.
- C
This describes the first route: replacing lost progressive-tax revenue with nonprogressive-tax revenue favors the wealthy. It helps support the main conclusion, but it doesn't cover the alternative in which those taxes aren't increased. The economist's overall claim concerns across-the-board personal income tax cuts under either path.
- D
This captures the second route: increased borrowing drives up interest rates, benefiting people with money to lend. It is a supporting part of the explanation, not the common conclusion reached through both routes. Selecting D would leave out the argument about replacing revenue through nonprogressive taxes.
- ECorrect
Across-the-board personal income tax cuts generally benefit the wealthy more than others. That is the claim introduced after the opening concession and supported by the two subsequent scenarios. 'Generally' preserves the author's 'tend to,' and the comparison doesn't say that only wealthy people receive any benefit. It says that cuts applying to all brackets still disproportionately favor them.
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